Saudi pre-budget statement welcomed by major credit bureaus

Saudi pre-budget statement welcomed by major credit bureaus

Some of the best credit rating agencies in the world have given a first favorable opinion on the financial and economic indicators contained in Saudi Arabia’s pre-budget statement for 2022.

Fitch Ratings said the Kingdom’s maintenance of a large financial reserve would help bolster its credit rating and provide greater flexibility to meet public financing needs amid continued volatility in oil revenues.

And Moody’s also pointed out that the Saudi government’s spending plans were a positive step towards developing the country’s credit rating. The firm also noted that the Kingdom’s proposals to cut additional spending in 2022 and 2023 aligned with its previously released balanced budget plan and showed a commitment to restrain spending despite significant upward revisions to the country’s projections. revenues against a background of rising oil prices.

The two agencies underlined the positive future orientations of the financial policies pursued by the nation in the extension of the structural measures and the reforms taken over the last five years in accordance with the objectives of Vision 2030.

The optimistic comments of the two international rating agencies on the pre-budget statement paint a bright future for the Saudi economy in the medium term, views supported by the rapid economic recovery this year compared to 2020 when it contracted by 4.11% due to the impact of the coronavirus disease (COVID-19) pandemic.

The Saudi economy started to rebound from the second quarter of this year thanks to the government’s strong will to continue implementing the economic and financial reforms necessary to achieve the goals of Vision 2030.

Due to the Saudi government’s determination to continue its reform agenda, the resumption of economic activity may well take place at a faster pace than pre-pandemic levels.

Talat Zaki Hafiz

The ambitious reform plan includes the development of public finances to meet the objectives of the country’s financial sustainability program aimed at strengthening government financial control by improving the efficiency of its spending.

Controlling public spending and improving its efficiency should reduce the budget deficit for 2022, which is expected to reach around 1.6% of gross domestic product. And by continuing the gradual decline in the budget deficit over the medium term, we expect a budget surplus in 2023.

A surplus would help the government control annual borrowing and keep it pegged at SR 989 billion ($ 263.7 billion) in 2022, or the equivalent of 31.3 percent. The budget surpluses anticipated from 2023 will be intended to reimburse the public debt and maintain it at the desired level relative to GDP. This will increase the government’s reserves and improve its ability to cope with any unforeseen financial shocks.

Due to the Saudi government’s determination to continue its reform agenda, the resumption of economic activity may well take place at a faster pace than pre-pandemic levels. In addition, government initiatives to stimulate the economy will support the private sector and improve its contribution to the Kingdom’s GDP to reach 65% by 2030.

Last but not least, the government aims to maintain the approved ceilings for medium-term public spending to support the Kingdom’s vision fulfillment program related to job creation for Saudi nationals, stimulate the private sector to support it. directs investment opportunities and continue government privatization. assets and services.

• Talat Zaki Hafiz is an economist and financial analyst

Disclaimer: The opinions expressed by the authors of this section are their own and do not necessarily reflect the views of Arab News

Dorothy H. Lewis